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Personal Growth

How to Set Financial Goals

Do you feel like you’re trying so hard to make the right decisions with your money but you can never seem to get ahead? Or have you been working your butt off, but you don’t have much to show for it at the end of the month?

Yeah, things like inflation and recession are real and can feel like huge obstacles. But if you don’t set any goals for your money, you’ll probably still feel like you’re spinning your wheels—even when the economy isn’t crazy.

If you want to finally make progress with your money, you need to set some financial goals. Don’t worry, it’s not as complicated as it sounds. I’ll walk you through how to set financial goals step by step.

What Is a Financial Goal?

A financial goal is any plan you have for your money. You can have short-term financial goals (like saving up $1,000) or long-term financial goals (like investing for retirement). You should set goals for every area of your life, but having specific financial goals helps you literally put your money where your goal is.

And I can’t talk about financial goals without talking about the Baby Steps. Trying to decide what to do with your money can feel as overwhelming as choosing what to watch on Netflix. There are so many options, and everyone’s got an opinion.

Should you pay off debt? Save for your kids’ college? Buy a house? Invest for retirement? The 7 Baby Steps cuts through all the confusion and gives you a clear path to do all those things! It helps you focus on one goal at a time—so you can make more progress with your money and have financial peace.

So, if you have no clue what financial goal to go after first, start by taking this quick assessment to find out what Baby Step you’re on.  

5 Steps to Setting Financial Goals

1. Make your goal specific.

One reason people fail to meet their goals is because they set goals that are too vague. You might say, “I want to be better with money.” But what does that actually mean to you? Narrow it down!

What if you decide instead to tackle your debt? That’s a specific area of your money to focus on. Now, let’s talk about how to break this goal down even more.

2. Make your goal measurable.

Okay, so you want to pay off debt. Now it’s time to pick an exact amount—something you can measure to know if you hit your goal or not.

While being completely debt-free should be your ultimate goal (that’s Baby Step 2), it’s a good idea to break down that goal into smaller chunks. That way, you won’t feel too defeated before you even start.

So, maybe you have $30,000 of total debt, but you want to start by paying off a $15,000 student loan first. Hey, that’s a measurable goal!

3. Give yourself a deadline.

Here’s the deal: It’s super tempting to procrastinate on your goals if they aren’t time-sensitive. Author Benny Lewis says, “There are seven days in a week, and ‘someday’ is not one of them.” Stop saying someday. You need to give yourself a deadline and make it reasonable—but also a little challenging.

Back to the student loan example: When do you want to hit your goal? If you want to pay off $15,000 in one year, that means you’ll need to pay $1,250 each month. Is this possible but also a bit of a stretch? If so, good! 

4. Make sure they’re your own goals.

Let’s talk about comparison for a moment. It’s easy to look around at what other people are doing and feel like you should be doing it too. Are your neighbors driving the latest model cars? Is that one girl on Instagram always taking extravagant vacations? Hey, good for them! But that doesn’t mean you need to do the same.

Get a FREE customized plan for your money in 3 minutes! 

When we compare ourselves to other people, we’re playing a game we’ll never win. So, make sure you’re setting financial goals that make sense for you. In other words, just because all your friends are taking out second mortgages for renovated kitchens, doesn’t mean you should. Put the blinders on, focus on your lane, and cross your own finish line. And be clear on why you’ve chosen the goals you have.

5. Write your goal down.

Did you know you’re more likely to achieve your goals if you write them down? Yep, it’s true—there’s something about putting pen to paper that helps you commit to the task at hand.

So, go ahead and put your goals in writing. Then, stick them in your car, to your desk, or on your bathroom mirror. Type them in the Notes app on your phone, take a screenshot, and set it as your wallpaper so it’s the first thing you see when you pick up your phone. Keeping your goals where you can look at them will keep you on track and motivated.

5 Common Financial Goals

With so much money “advice” floating around, it can be hard to know which financial goals are right for you. Like I said before, start with the Baby Steps to figure out your big-picture money goals. But there are also smaller goals that can help you hit those milestones.

Here are some of the most common financial goals people set and tips on how to make them happen.

1. Create and stick to a budget.

Not only is budgeting one of the top financial goals people set each new year, but it’s also the foundation you should build all your other money goals on.

A budget is how you make progress with your money. It’s a plan for what’s coming in (your income) and what’s going out (your expenses). You’re telling your money where to go, instead of wondering where it went. So you can feel confident you’re taking steps toward your goal every month.

Budgeting helps you gain momentum in every area of your finances. If you’re already budgeting, bravo! If not, get started for free with EveryDollar.

2. Build up an emergency fund.

Life happens. But you can be prepared for any money problems that come your way if you’ve got enough money saved up. I’m talking car trouble, medical expenses and busted toilets (you know, some of the worst parts of being an adult). But when you’ve got an emergency fund, you can rest well at night knowing you won’t have to go into debt to cover those moments.

Start with the financial goal of having $1,000 in savings. Then, if you have debt, it’s time to knock that out. (I’ll talk more about that in a minute.) After that, you want to build up a fully funded emergency fund with 3–6 months of expenses. (Again, this is all covered in the Baby Steps—the proven plan to help you take control of your money.)

When you’ve got an emergency fund, you’re ready for those “life happens” moments. Instead of being worried about what could happen next, you’ll feel confident that you’ve got money set aside to deal with it.

3. Get out of debt.

If you’ve got debt, it’s time to get serious about paying it off. All of it. Yeah, I know that may seem impossible right now, especially if you’ve got some big numbers staring you in the face. But listen, debt doesn’t move you forward— it holds you back. You can’t get ahead with your money if it’s always going to payments.

If you want to free up more money to use toward your goals, check out Financial Peace University (FPU). This course will show you exactly how to ditch debt for good and work your way through the Baby Steps.

4. Save up for your retirement dreams.

Take a moment to imagine your ideal retirement. Do you want to pack up the grandkids and head to Disney every Christmas? Visit a new state with your spouse once a quarter? Read every book on your shelves? Take up a fun hobby?

No matter what you’re dreaming of for the future, you’ll need good retirement investments now to make it a reality. So, once you’re debt-free and have that fully funded emergency fund, I want you to start investing 15% of your household income for retirement. And guess what? When you have zero debt, all that money you were sending to payments is now investment fuel for your retirement dreams!

5. Spend less and save more.

Tons of people throw out the goal of “I want to spend less” or “I want to save more” without thinking about what it means to actually do those things. But you’ve got to be intentional about your money habits.

Create and stick to your budget every month, find deals, use coupons, pay cash. And here’s a big one: Learn how to say no—even to yourself! I’m not saying you should never have fun. But if you want to save money, it’s going to take some planning and lifestyle adjusting.

And finally, here’s one of my favorite tips for spending less and saving more: Plan your meals! Food is where most Americans overspend, and meal planning is how you rein that in. Check out my free Weekly Meal Planner and Grocery Savings Guide to see how to save time and money on food.

An Example of a Financial Goal in Action

Okay, so now that I’ve gone over the basics of financial goal planning, let me give you an example of how this can work in real life.

A while back, my husband, Winston, and I decided to build a house. Before that, any extra income we brought in went straight to our general savings. But I knew building a house would cost a lot, and random expenses were bound to pop up during the process.

So, we made it a goal to save up as much as we could—specifically toward our house. And while saving up that much money seemed almost impossible, breaking it down into monthly goals gave us so much momentum. Having a plan for our money not only made our dream possible, but it also made the process fun!

It’s also what kept my spending tendencies (aka spendencies—trust me, it’s a thing) in check. Knowing my money was going toward something that I really wanted motivated me to spend less. And even though there were moments when we felt fatigued—I mean, there were some days when all I wanted to do was relax and spend money—finding creative ways to hit our goal faster kept us on track each month.

Beyond that, it was character-building. It’s a time in our marriage that we’ll always be able to look back on and know we accomplished something hard together. It helped cultivate connection between us and contentment in my own heart. Now I realize those benefits of the process are worth more than the new house.

Why Is Setting Financial Goals Important?

Having a goal helps you be more future-minded with your money. You’ll start to see how every decision you make adds up and matters to your overall financial health.

For example, if you don’t have financial goals, it’s no big deal to buy breakfast and coffee every day. But let’s look at just how much that’s really costing you. You’ll typically spend at least $25 for just one workweek of lattes—that’s $100 a month! What else could you do with that money?

If you put $100 in an investment account every month for five years, your latte fund could grow into more than $8,000, thanks to the power of compound interest. That’s a whole semester of your kids’ college you’re drinking!

Imagine if you thought even more long term and invested $100 a month for 15 years. Your latte savings could grow to over $45,000.

And if you invest your savings for 30 years? Your coffee money could grow to over $280,000. A latte a day or a quarter of a million dollars? You guys, I like a good cup of coffee but not that much.

If you want to set yourself up to be financially secure, find small (or large) sacrifices you can make right now. The everyday things you do with your money today will impact your future.

lattes vs investing

Goals Will Get You Where You Want to Be

Financial goals will help you change your mindset, your habits and ultimately your life.

When you’re intentional with every dollar you have, you’re able to make your money go further. That means you get to do more of the stuff you want to do and plan for the things you’ll do in the future.

You can do more than you ever thought possible, but you’re going to need some financial goals to help you get there. Decide what you want your future to look like and figure out what you need to do today to make it happen.

You can live on your terms instead of the bank’s.

You can get out of debt once and for all.

You can build wealth and pay for things that matter to you.

There are lots of things that influence the way you set your financial goals: Your life growing up, your motivations, and your own dreams for the future are just a few. If you want to better understand why you handle money the way you do, and what to do about it, check out my book Know Yourself, Know Your Money. It gets to the root of your specific money tendencies to help you take control of your money and reach your financial goals faster.

And remember, it all starts with a budget. This is the foundation. It’s the plan. And it’s how you get intentional with your money. Go ahead and start your free budget today with EveryDollar. Then, get moving on those five steps to setting and reaching your financial goals. No matter the time of year, you can turn these dreams into reality. Go get it! 

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Rachel Cruze

About the author

Rachel Cruze

Rachel Cruze is a #1 New York Times bestselling author, financial expert, and host of The Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simple and Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

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